A UK based investor has £A to invest for 1 year. Compare all nine possible combinations of

Page 3: Introduction to the Financial System Page 7: Commercial Banks Page 12: The Share Market and the Corporation Page 15: Corporations Issuing Equity into the Share Market Page 19: Investors in the Share Market Page 24: Short-term Debt Page 28: Medium- to Long-term Debt Page 32: Interest Rate Determination and Forecasting Page 37: The Foreign Exchange Market Page 40: Factors that Influence the Exchange Rate Page 42: Futures Contracts and Forward Rate Agreements Page 47: Options

The goal of this case is to help Sandra Meyer develop a presentation to address Henry Bosse’s concerns about international investments. The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1) the impact of foreign exchange (FX) rates on the return and risk of international investments, and 2) the impact of having more assets on the return and risk of the investment portfolio To form views on these two points, answer the following questions: I. The impact of FX rates on the risk and return of foreign investments 1a) Using data in Appendix A, calculate the

The exchange rates risk that is associated with economic, transaction, and translation exposure in Indian market. From the analysis, anticipate the fluctuations that seem to occur in the next 24 months

11. Describe at least three exchange rate factors that are likely to attract foreign investors to a country 's currency. Explain why these factors are attractive for foreign investors. (3-6 sentences. 3.0 points)

4. Apple, whose global sales are generally dollar denominated, finds it has excess cash of $155,000,000,000, which it can invest for up to three years. It has determined that its best options are either a three-year Euro-dollar ($) deposit paying 2.75% or a three-year Swiss Franc denominated deposit paying 1.60% since it expects the SF to appreciate 1.15% per annum against the dollar over the next three years. Using cash flow analysis determine the best currency option in which Apple should invest. Be sure to show your complete calculations of the annual return on each investment at the end of the three-year term. Assume that the annual interest amount is reinvested, i.e. compounds, at the same annual interest rate. Would your answer change if Apple revised its outlook for the SF to appreciate 1.2% per year? Show all calculations!!!

If the annual inflation rate is 3.5 percent in the United States and 2 percent in the U.K., and the dollar depreciated against the pound by 2.5 percent, then the real exchange rate, assuming that PPP initially held, is:

In the similar time period Japanese Yen has been in the third position with a turnover position of 20.8% in the year 2005. The overall financial market currency structure has seen a decline in the turnover position of the US Dollar to 85% from a strong position of 88%. Similarly a decline has been in the position of the Japanese Yen to 17.2% from an acceptable turnover position of 20.8%. While considering the trend of these two currencies during the period starting from 2007 and ending at 2010, it is to be noted that minute changes were seen in the two different currencies with regards to their share in foreign currency market. The US Dollar witnessed a continued fall to 84.9% from its previous 85.6% however, the Japanese Yen saw a rise from its previous position of 17.2% to an increase of1.8% that is 19%. During the same time period the US dollar and Japanese Yen were the second most traded paired currencies and was traded at around 14% of the overall foreign currency market second to the US Dollar and Euro pair. Conclusion The foreign exchange market has seen considerable changes owing to the global financial crisis. It is to be seen how different factors like economy and global politics further impact strong currencies like the US Dollar and other competing currencies such as the Japanese Yen.

Whether the United Kingdom decides to join the European single currency and replace the pound with the euro will have profound economic as well as political effects on the country so is a very important decision and has considerable variations in attitudes towards the topic, although the British public opinion has consistently opposed joining the euro. The euro is currency shared by 18 of the European Union's Member States. The euro was introduced in 1999 and automatically became the new official currency of 11 States, followed by another 7 countries joining to date. However, the UK negotiated an opt-out to from the Treaty meaning they don’t have to adopt the common currency as they fit a certain criteria [1]. Joining the European single currency can have major advantages for the UK, such as diminished uncertainty of exchange rate for businesses and the decreased need to pay transaction costs of changing currencies when abroad. It can also have disadvantages such as loss of domestic monetary policy and variable rate debt in the UK.

There is also risk of volatility with respect to exchange rates in the short and long term

The above calculations have not taken into account any growth of the market or other variables. Also assuming that GM would not respond to a 20% change in exchange rates also may not be realistic.

conclusion, USD is likely to be the best target currency to invest with stable Real

Practicing CIA (Covered Interest Arbitrage) by borrowing CAD 96 Million to buy USD on April 1, 2002, and invest the USD for six months. At CAD interest rates of 2.70% for borrowing and 2.55% for depositing, and USD interest rates of 1.85% for borrowing and 1.65% for depositing.

If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, and the expected return on dollar depreciation against the euro is zero percent, then

International Financial Management Trial Exam Closed Book Examination INCLUDEPICTURE uvafileserverjligter1DataOnderwijsInternational Financeif2008sbriederLocal SettingsTempRarDI04.890ABS-logo.gif MERGEFORMAT Closed Book Examination Answer as brief and concise as possible redundant or superfluous remarks may lead to a lower score. The maximum score per problem is given between parentheses. The maximum score of the whole exam is 100 points. QUESTION 1 - 20 points SHAPE MERGEFORMAT This graph depicts the REAL value of the broad index which is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. a) Consider the following table of price levels,

Because there is upward pressure on the pound some investors may anticipate an appreciation. This may discourage British investors from attempting to capitalize on US higher interest rates. If the uncertainty about future exchange rates discourages British capital flows to US, there would be no reason to anticipate the pound to depreciate.